A Forrester report finds that traditional evaluations for employees are flawed, and that advanced technologies can add value by empowering and motivating workers.

A new report by Forrester Research made the case for improving performance management with new technologies that offer continuous reviews and coaching.

The report singled out about a dozen vendors that offer next-generation tools for continuous feedback and recognition from peers and managers, such as 7Geese, BetterWorks, ClearCompany, TapMyBack, TMBC, Workboard and Zugata.

Paul Hamerman, co-author of the report, and a vice president and principal analyst at Forrester, discussed the findings with SearchFinancialApplications.

Paul Hamerman: There are a lot of reasons. The periodic process is too late to impact performance in a positive way. It is a summary of your past performance over the year or half year, but it is not forward-looking.

The traditional approach also takes up a lot of time of employees and managers, and is not always worth the effort involved in terms of the results coming out of it.

It is also too closely linked to salary adjustments. If you look at the rate of inflation over the past five to seven years, it averages less than 2%. Why go through an exhaustive performance appraisal, and then come up with salary increases in the 1% to 3% range?

A lot of time is invested in a performance review, which doesn't motivate employees at the end of the process.

The traditional process is often based on the notion that performance is about skills. It's not what the business cares about. The business cares about driving business results, like revenue growth and customer retention.

We think continuous performance is the way to go.

About a dozen emerging vendors offer software with common themes of continuous feedback, coaching and recognition. Do these new performance appraisal tools integrate with talent management software, such as learning and succession management?

Hamerman: The systems we mention in the report are not tightly integrated with talent management systems or other business systems. But it's possible to integrate these performance solutions to collect data coming out of business systems, such as ERP and sales, and use it in assessing performance. It's important to be able to collect business data reflecting individual performance against goals. Sales organizations tend to be very good at that. That is a model that is going to become more pervasive across the enterprise.

Which of these next-generation vendors are the best for encouraging collaboration and openness among team members?

Hamerman: The report mentions a vendor called Zugata. The product is designed for peer-to-peer feedback. It continuously gathers feedback on performance and it is generally anonymous, real-time feedback from team members. The report mentions several other applications that include continuous feedback, including TapMyBack, BetterWorks and 7Geese.

What kind of mind-set among employees is needed to use these new tools effectively, especially if they enable anonymous feedback?

Hamerman: In peer-to-peer feedback, the mind-set should be one of encouragement. It tends to involve praise in many cases, but it should also include constructive feedback and suggestions for improvement. The mind-set should be geared toward teamwork and collaboration, rather than competition.

How do you ensure that continuous feedback is sparking productivity and growth?

Hamerman: Feedback has much more value if you continuously measure and track progress against a set of goals or business outcomes. One vendor in the report, called Shared Performance, is based on a methodology called Enterprise Outcome Management. In the report, we note that it seeks to increase employee performance by managing short-term and long-term outcomes that support enterprise strategies.

Considering the amount of data collected by newer vendors highlighted in the report, such as BetterWorks, Zugata and TMBC, should users be concerned about privacy issues?

Hamerman: Confidentiality is certainly important in the context of HR processes, and these systems are designed for that. The performance conversations between employees and their manager are confidential and must be handled as such when logged in the systems. Data privacy and protection related to employee data, on the other hand, is a regulatory issue that must be addressed by the software vendors in specific countries and regions.

As a cultural issue, it is up to companies to decide about the transparency of performance information. Some companies, for example, post leader boards and are very transparent about individuals' performance as it relates to their peers. Transparency of performance results can have motivational value when used in a team-oriented culture.

Some big vendors are offering new continuous coaching and goal-setting tools. Workday provides Anytime Feedback and Anytime Goal Management. Cornerstone OnDemand and Halogen have similar technologies. Are these technologies as good as the tools offered by newer, maybe more focused vendors?

Hamerman: Some comprehensive talent management vendors are improving in terms of adopting continuous performance. SAP, for example, just announced continuous performance management capabilities within SuccessFactors. The next-generation performance vendors, however, are using some differentiated techniques that I have not yet seen in the more comprehensive HR and talent systems.

Several vendors, such as 7Geese, BetterWorks, StatusPath and Workboard, incorporate a methodology called Objectives and Key Results, or OKRs, which started at Intel and are used at Google. How does this improve performance?

Hamerman: It focuses on tracking progress against a set of generally measurable goals and objectives. It is a framework that is continuous and forward-looking. It seems to be picking up momentum in the market. The applications tell you where you stand at any point in time on your objectives and results, and that application is generally accessible on your mobile phone and is very visual. It is a good way of aligning what you are working on with what you are expected to do.

Why did your research find that many organizations are reluctant to deconstruct the performance management process?

Hamerman: One perceived value of a traditional process is that it serves as a historical record of an employee's performance. For legal reasons, many organizations may want to have that, especially if they decide to terminate someone and they want data to show the person is not performing. There are some legal and compliance concerns that lean toward retention of the traditional process. But some of the newer solutions can also create an historical record as well. A lot of companies may not be ready to innovate this process, but may see the value of it in the future.

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AlbertGareev -- Thanks very much for the comment. Personal contact is important, but some of these new tools -- Zugata, BetterWorks, Workboard, 7Geese - are pretty exciting and groundbreaking in the field of performance review and can improve the process. The workplace is entering a whole new era with these types of tools. It will be interesting to see how these tools evolve and take hold over the next 5 years or so.